Congressional Democrats on Tuesday introduced legislation in both houses of Congress that would ban hedge funds from buying and owning single-family homes in the United States.
The bill would require hedge funds, defined as corporations, partnerships, or real estate investment trusts that manage pooled funds from investors, to sell all single-family homes they own over a 10-year period, and eventually would prohibit such companies from owning housing. A completely detached house. The bill would impose stiff tax penalties during a 10-year phase-out period, with the proceeds going to provide down payment assistance to individuals looking to buy homes from corporate owners.
The bill, known as the U.S. Housing Hedge Fund Deregulation Act of 2023, could transform a growing sector of the housing market and increase the supply of single-family homes available to private buyers. Homeownership, long a cornerstone of wealth building in the United States for generations, is becoming increasingly out of reach for Americans as home prices and interest rates soar.
“Rather than ordinary Americans competing with other families, we are competing with America's billionaires to buy these homes,” said Oregon Sen. Jeff Merkley, who co-sponsored the bill with Washington's Rep. Adam Smith. “We have created a situation where we are competing against each other.” “And that's driving up rents and driving up home prices.””
In a separate bill, North Carolina Reps. Jeff Jackson and Alma Adams, both Democrats, introduced the Protecting American Neighborhoods Act on Wednesday. The bill would require corporate owners of 75 or more single-family homes to pay $10,000 per year per home into the Housing Trust Fund to provide down payment assistance to families.
With Congress divided, the bill is unlikely to pass this session. But Smith said lawmakers need to start a dialogue.
The bill was introduced three months after the New York Times published an article examining the impact of corporate-backed investments in Charlotte, North Carolina. In Charlotte, investors bought 17 percent of the city's homes with cash in 2022, often outselling the original buyers. Heavily dependent on home loans.
In a pattern repeated in cities across the country, companies focused on affordable housing, often in areas with large Black and Latino populations, and converted the properties to rentals. In one east Charlotte neighborhood, Wall Street-backed investors bought half of the homes sold in 2021 and 2022. On one block, all but one of the homes sold during that period were sold for cash to investors who were renting them out.
Wall Street entered the single-family rental market in the aftermath of the 2008 housing crisis, tearing up foreclosed homes. Since then, its influence has grown. By June 2022, institutional investors owned 3% of single-family rental properties nationwide, but held significant market share in more affordable markets. In Charlotte, they owned 20 percent, according to the Urban Institute. Investors remained active even as the housing market slowed, purchasing 26% of single-family homes sold in June 2023, according to data analysis firm CoreLogic.
“Wealth is concentrated in the hands of a very small number of people,” Smith said in a phone interview. “This is just another way to commoditize housing and allow investors to keep all the money.”
David Howard, chief executive of the National Rental Housing Council, an industry group, said the problem is not Wall Street but a lack of new housing. According to various estimates, the country needs between 2 million and 6.5 million new housing units.
“We need to define and develop policies that support the production, investment and development of new housing,” Howard said. “I think any bill to the contrary will ultimately only perpetuate the challenges we already face.”
